The best thing for a company to do is honestly to maximise its profits

Suppose you owned a pharmaceutical company. Why would you want it to manufacture a dangerous drug? Set aside the moral considerations. Imagine you were one of those inhuman capitalists that fill the fevered imaginations of Occupy types. Wouldn’t you none the less see that bumping off your customers was bad for business?

I ask the question having just watched a thriller called The East. I don’t want to spoil the plot: it’s rather a good film. Let me just say it involves wicked corporations poisoning children, contaminating rivers and generally torturing Gaia. The producers evidently felt that such behaviour needed no explanation: film-goers would take it for granted that this is what businesses do.

I’m amazed by how many people think this way. Do you remember the main argument against rail privatisation? The rail companies, we were forever being told, would Put Profits Before Safety! No one bothered to explain how crashing trains would increase their profits. And, sure enough, accidents fell following privatisation – as did the public subsidy. Profits and safety turned out to be complementary.

What about a corporation that is harming, not its customers, but someone else? Economists call such harm “externalities” – costs that are borne by third parties. An example would be a mining company whose activities caused neighbouring land to be flooded.

The extraordinary thing is how adept our common law system is at dealing with such cases. The first time a coalmine flooded someone else’s land, more than two centuries ago, the judge, necessarily lacking precedent, ruled that compensation must be paid because of the long-standing principle in English law that someone “who has a dangerous thing in his possession” had a duty to keep it under control.

Companies are covered by the same general laws as the rest of us. If they lie about what they are selling, or breach their contracts, or adulterate their produce, they can be taken to court. Common law, growing like a coral, case by case, continuously adapting to new circumstances, is generally a better redress than a parliamentary statute, which will often create unintended costs and injustices.

I can think of three important exceptions. One is where the externalities are diffused, making it hard to identify a specific victim: acid rain, say, or leaded petrol. A second is where the cost falls upon something other than a legal person – the suffering involved in battery farming, for example. A third is where ownership rights alone cannot prevent the depletion of a resource: quotas to keep fish stocks sustainable are the obvious instance. In these cases, even the most ideological libertarians generally allow that state regulation is beneficial. In general, though, businesses want good reputations, strong brands and loyal customers. They are as entitled to a presumption of innocence as anyone else.

“But companies are only interested in making money”, people complain. As opposed to what, precisely? Scottish country dancing? Blue period Picasso? Companies are supposed to be interested in making money. It’s when they lose money that problems arise. ("The worst crime against working people", the American trade union leader Samuel Gompers used to say, "is a company which fails to operate at a profit".)

Alright, you say, but shouldn’t they also behave morally? Isn’t there an obligation on them to go beyond the letter of the law? The answer depends on our understanding of what a company is. Corporations might have legal personality, but they are not, and cannot be, moral creatures. An individual might visit prisoners or work in a soup kitchen or give to the poor. He might, indeed, do these things while being a company director. But his firm is a different matter. The best way for it to contribute to the general good is not to seek to mimic the ethical choices of an individual, but to remunerate its staff, meet its customers’ demands and pay its taxes.

I’ll go further. The most ethical behaviour for a company director is honestly to maximise his profit and then, from his share of that profit, to give carefully and intelligently to charity. If he instead pursues various forms of “corporate social responsibility” which diminish his profit, then he is in effect shuffling his charitable donations onto someone else: his clients or suppliers or employees. His behaviour becomes that much less moral, that much more selfish.

People misunderstand the purpose of a business. It isn’t supposed to redistribute wealth, or promote education in Africa, or combat racial discrimination. Nor is it there to pay its employees an arbitrarily fixed sum, nor source its materials in the way that a pressure group demands: these things will be set by market conditions. It will pay its employees what it can afford (and, as capitalism spreads, and employers compete for staff, that sum will rise). Of course, the people who make such criticisms are often hostile in principle to free enterprise and private enterprise. Fine: whatever’s their bag. It’s just that, so far, no one has come up with a better model.